Housing correction is accelerating and will continue into next year: report

OTTAWA — Desjardins expects the average home price in Canada to decline nearly 25 per cent by the end of 2023 from its peak in February of this year.

In its latest outlook on residential real estate released Thursday, Desjardins expects a sharp correction in the housing market, adjusting its previous forecast which predicted a 15% drop in the average house price over the same period.

Desjardins says the deteriorating outlook stems from both weaker housing data and more aggressive monetary policy than expected.

The Bank of Canada raised its policy rate by one percentage point in July, pushing up mortgage lending rates, and further hikes are expected this year.

The report also notes that house prices fell more than 4% in each of the three months since February, when the average national house price hit a record high of $816,720.

Despite the forecast adjustment, prices are still expected to be above the pre-pandemic level at the end of 2023.

Regionally, the report indicates that the largest price corrections are most likely to occur in New Brunswick, Nova Scotia and Prince Edward Island, where prices have soared during the pandemic.

« While we don’t want to alleviate the difficulties some Canadians are facing, this adjustment helps bring some sense back to Canadian real estate, » the report said.

The authors also note that the coming economic downturn will ease inflationary pressures enough for the Bank of Canada to start reversing interest rate hikes. Desjardins expects the Canadian housing market to stabilize at the end of next year.

This report from The Canadian Press was first published on August 11, 2022.

Nojoud Al Mallees, The Canadian Press